DraftKings sues former executive for taking secrets to sports-betting rival

Feb 6 (Reuters) - Sports-betting provider DraftKings (DKNG.O), has sued one of its former executives Michael Hermalyn in Massachusetts federal court, accusing him of stealing confidential business information and taking it to rival Fanatics.

DraftKings told the court on Monday, that Hermalyn, who had been a senior vice president with the company, left abruptly last week, ten days before the Super Bowl, and asked the court to block him from using its secrets to "divert its most valuable customers" before "one of the most business critical weekends" for sports betting.

Hermalyn filed a separate lawsuit in California state court against Boston-based DraftKings last week, arguing that it was illegally trying to prevent him from moving to Fanatics based on unenforceable noncompetition, nonsolicitation and other employment agreements.

Hermalyn could not immediately be reached for comment on Tuesday. A spokesperson for Fanatics, which is not a defendant, said in a statement on Tuesday that the Massachusetts lawsuit was "just sour grapes."

"The fact that they are trying to drum up ridiculous allegations on one of their well-respected executives in an attempt to ruin his reputation sheds some light on why employees may be choosing to leave that organization," the spokesperson said.

DraftKings declined to comment on the lawsuit.

Fanatics, best known for selling sports jerseys and merchandise, launched its sportsbook last year. DraftKings told the court that Hermalyn, who oversaw its relationships with its largest "VIP" customers, secretly met with Fanatics leadership at last year's Super Bowl to first discuss working there.

"There are a handful of online gaming businesses that compete for the small number of high-net worth players who drive substantial revenue," the lawsuit said. "These competitors jealously guard the customer relationships that they establish, the technology that they create, and the marketing strategies that they develop."

The lawsuit said that Hermalyn traveled to Fanatics' Los Angeles offices last week, where he took a nearly identical position and downloaded DraftKings' Super Bowl business plans to share with his new employer.

DraftKings said he lied to the company that he was gone "mourning the loss of a friend from Pennsylvania" at the time.

DraftKings asked the court for orders blocking the misuse of its secrets and monetary damages that include millions of dollars Hermalyn received under his contract.

The case is DraftKings Inc v. Hermalyn, U.S. District Court for the District of Massachusetts, No. 1:24-cv-10299.